A simple and practical method to measure rotation axis two-dimensional displacements using a reflective intensity modulated optical fiber sensor is presented, in which a diffuse reflective pattern etched on the end face of the rotator is used to modulate the reflective optical intensity. In this manner, the amount and direction of the rotation axis transverse displacements (RATD) is determined by calculating the amplitude and the phase of the modulated intensity signal. Theoretical analysis and model design are presented, and an experimental system with precision motion control device and high accuracy air bearing rotator is established. The experimental results indicate that the resolution and the sensitivity of this sensor can respectively achieve 0.1 µm and 31.6 mV/µm. The direction measurement inaccuracy of the sensor is within ±2 deg. In addition, when adjusting the reflective distance, the sensitivity and linear measuring range of this sensor is adaptable.